Monday, January 19, 2009

Can Economists Be Trusted?

Mark Thoma has an interesting discussion of the challenge that the economics profession, and individual economists, have when they give policy recommendations.

Mark's basic point goes as follows. Consider the following four stages of a model:

(a) assumptions about fundamental principles of how the world works,(b) normative principles (that is, fundamental goals, views about how the world should be),(c) conclusions about the likely effects on policy,(d) recommendations about policies.

In any rigorous economic model, there should be a mapping leading from (a) to (c). Further reasoning (possibly mathematical modeling, as in cost-benefit analysis) will take you from (b) and (c) to (d).

That's all fine. But Mark's point is that the reasoning can go the other way too: start with (b) and (d), and then you can figure out what (c) needs to be, and then you can go back one more step and figure out what model (a) you need to get started! Even if economists are not doing this reasoning-from-conclusions-to-assumptions explicitly, you could well believe it's going on implicitly as well as being induced by various pressures such as the selection of what research results to report and even what problems to work on.

1 comment:

...the slipperiness/shadiness of the profession in general (crystallized by my reading of Taleb's books) makes me glad I'm getting a masters. I get the feeling I'll be coming out with enough information to know what I don't know, and know what other people can't know, despite their claims to the contrary.

Sounds, as I've said in the past, about like what I got out of seminary.